Global Daily Tax News, Albania Signs Pillar Two Subject To Tax Rule MLI, (Sep 26, 2025)

Albania signed the Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (the STTR MLI) on September 23, 2025, becoming the 10th jurisdiction to join the agreement.

The MLI is intended to support implementation of rules requiring that multinational enterprises pay a minimum level of tax on a broad range of cross-border intra-group payments, including for services. The Subject to Tax Rule (STTR) will enable developing countries to tax certain intra-group payments, in instances where these payments are subject to a nominal corporate income tax rate below nine percent.

The STTR allows source jurisdictions to impose a tax where they otherwise would be unable to do so under the provisions of tax treaties, where the intra-group income is subject to a nominal corporate tax rate below nine percent and where domestic taxing rights over that income have been ceded under a treaty. It applies to interest, royalties, and a specified list of other payments, including all intra-group service payments. These include payments for distribution rights for a product or service; insurance or reinsurance premiums; payments of guarantee or financing fees; rental payments for industrial, commercial, or scientific equipment; and payments for services.

The STTR takes priority over the GloBE Rules – that is, the Income Inclusion Rule and the Under-taxed Payments Rule. It is creditable under those rules. The measure is designed to help developing Inclusive Framework members to protect their tax base. The STTR applies only if the aggregate sum of income covered by the MLI paid in a fiscal year exceeds EUR1m (or EUR250,000 for jurisdictions with GDP below EUR40bn).

The STTR MLI is intended to support countries to efficiently implement the STTR in existing bilateral tax treaties. More than 70 developing Inclusive Framework members are entitled to request inclusion of the STTR in their treaties with Inclusive Framework Members that apply corporate income tax rates below nine percent to covered payments. Members of the Inclusive Framework that apply nominal corporate income tax rates below nine percent to any category of income covered by the STTR MLI have committed to implement the STTR into their bilateral treaties with Inclusive Framework members that are considered as developing countries when requested to do so.

The STTR does not itself impose a tax obligation but allows jurisdictions to impose a tax where they otherwise would be unable to do so under the other provisions of the treaty. Where no bilateral income tax treaty applies, source jurisdictions are already able to impose tax on these payments. The STTR does not apply to income where the source state can already impose an amount of tax that is greater than the STTR rate of nine percent under another treaty provision.

The STTR covers payments between connected persons. Two entities will be connected if both entities are under the control of the same person (or persons) either legally (direct or indirect ownership of more than 50 percent of the interests in the parties) or as a matter of fact and circumstance. Individuals, non-profit organizations, governments, international organizations, and investment funds (subject to conditions) are specifically excluded.